China may put curbs on molybdenum export

China, the world's second largest producer of molybdenum, may impose quotas on the exports of ferro-molybdenum soon as a part of the government's efforts to control the expansion of the polluting mining sector and ensure domestic supplies of the alloy.

The ministry of commerce is studying possible export quotas for ferro-molybdenum, which is used to toughen steel and prevent corrosion, and may impose them ``very soon'' this year, Wu Wenjun, general manager at Luoyang Luanchuan Molybdenum Group, said at a conference in Foshan, Guangdong province today.

China, which has the world's largest molybdenum reserves, is concerned that rapid growth of the mining industry is worsening pollution. The country's exports of ferro-molybdenum have been falling, while consumption has been rising by around 10 per cent since atleast 2004 on account of the rising demand from steel producers.

"China is the major exporter of molybdenum products to the world and the introduction of a quota system will be the third move by the central government since the start of 2006 vis-a vis the molybdenum industry,'' Australia's Macquarie Bank said in a research note dated March 9.

"China's ferro-molybdenum exports are expected to continue to fall because of rising domestic consumption and government's policies,'' Wu said. ``China's falling exports are likely to add to a worldwide supply shortage.''

China mined an estimated 41,000 tonne of molybdenum last year, second only to US, according to US Geological Survey data issued in January.

China's consumption of ferro-molybdenum rose by 9 per cent to 30,383 tonne last year, accounting for 62 per cent of the production, while exports fell by 26 per cent to 18,598 tonne, compared with the previous year, according to Wu's slide presentation.

Luanchuan, China's largest producer of ferro- molybdenum, is involved in a joint project with U.S. Phelps Dodge Corp to invest in a $100 million 40,000 tonne-a-year molybdenum smelting plant in Luoyang.

The company, based in the central province of Henan, plans to raise 5 billion yuan ($647 million) by selling shares for the first time in Hong Kong, Wu said.